After keeping tabs on housing prices over twelve months, the Canadian Real Estate Association determines that prices increased by 17%. Further, a dozen real estate markets, representing 25% of all Canadian markets, report experiencing over 30% in price gains. Assuredly, real estate prices are up, and a new survey says the situation may subsist for some time.
Nanos Research Group presented the results of a recently conducted poll. The analysis reveals that 60% of the Canadian population expects housing prices to hit a new high after six months. The statistic stands out as, since 2008, the research firm has never recorded anything over the 60%.
The Downside of High Housing Prices
The high expectations of a price increase by Canadians may have various demerits. A Royal Bank of Canada economist, Robert Hogue, refers to the fear of missing out as one of the looming dangers. Speculators may rush to the market to make purchases that they can profit from in the future. The increased demand will result in inflated prices, which means that medium-wage families will have difficulties buying a home. At its worst, the inflated market may crash.
In February, Tiff Macklem, Bank of Canada Governor, gave an early warning sign of rapidly increasing housing prices. Investors are buying homes, effecting minor facelifts, and reselling at a high premium. Statistics Canada noted the trend and reported that the rate at which new houses are rising last appeared three decades ago.
Why Are Prices Hiking?
Two reasons help explain why housing prices are moving to record high. The work from home trend is becoming prevalent as organizations explore ways to keep personnel safe amid the COVID-19 pandemic. Thus, a house is now more than a home. It is also a place of work, and prospective homeowners are paying more for the added value. On the consumer’s side, the working population’s demand for single-family houses keeps the prices rising.
The other explanation lies in low mortgage interest rates. In 2020, the rates hit a record low and lowered the cost of owning a home. As usual, low prices attract high demand and prices. Today sees a great disparity between the 30% increase in home price gains and the 2.2% increase in home-ownership cost.
The Government’s Role
At the moment, the Canadian government is keeping its hands off the real estate price increases. However, Robert Hogue insists that the authorities have their concerns and continue to examine effective measures to put in place.
